Tougher at the bottom

Rising inflation and less generous state benefits have made it harder over the past year for families on tight budgets to enjoy what the public considers a decent standard of living, according to one of Britain’s leading thinktanks, the Joseph Rowntree Foundation (JRF). 

Despite an above-inflation increase in the “national living wage”, low-income families were falling further behind a minimum income standard. The thinktank said less generous in-work benefits had made life tougher for all low-income families with children, and that lone-parent single-breadwinner families were the hardest hit.

The minimum income standard is based on feedback from the public on what it thinks people need to achieve a decent living standard. It includes money for school trips, Christmas presents and swimming lessons, and is updated annually to take account of economic trends and policy changes. The research found that despite the national living wage rising from £7.20 to £7.50, the gains had been offset by the rise in the cost of living, the freeze on tax credits and benefits, and wage increases being clawed back through reduced in-work benefits.

The JRF said a single person now needed to earn £17,900 a year to reach the minimum income standard. A dual-earner couple with two children needed to earn £20,400 each, while a lone parent with a preschool child had to earn £25,900. Developments over the past 12 months had made achieving these targets more difficult.

 A single-breadwinner family was £120 a week short of achieving the minimum income standard this year, up from £103 a week in 2016. An £11.24 pay rise from the national living wage had been offset by a £9.03 reduction in tax credits and housing benefit, and a £1.25 increase in tax and national insurance payments. The resulting 96p a week increase in pay had been dwarfed by a £17.75 rise in living costs, widening the gap between income and outgoings by £16.79 a week.

A lone parent was £55 a week short of the minimum income standard in 2016, but the shortfall widened to £67 a week in 2017. An £11.24 pay rise from the national living wage had been offset by a £3.51 reduction in tax credits and housing benefit, and a £1.44 increase in tax and national insurance payments. Net pay rose by £6.29 a week, but living costs added £18.55 to weekly expenditure, widening the gap with the minimum income standard by £12.26 a week.

The JRF said the gap for a working couple on low incomes had widened from £50 to £59 a week over the past 12 months.

Campbell Robb, chief executive of the JRF, said: “Struggling families tell us, as well as juggling the bills, it’s things like after-school clubs and swimming lessons that have to be sacrificed to cover the essentials.

“With the Bank of England forecasting inflation will increase even higher this year, families are facing no respite. We need the government to take action and ensure living standards do not fall backwards. Lifting the freeze on working-age benefits and tax credits must be the start, along with allowing people to keep more of their earnings.”

Frances O’Grady, general secretary of the TUC, said: “The government needs a proper plan to get wages rising. Ministers must stop holding down the pay of public sector workers, and give them their first proper pay rise in seven years. The minimum wage needs to rise faster, to reach £10 an hour as soon as possible.”